NBER Working Papers and Publications

We characterize the relation between asset structure and capital structure by exploiting variation in the salability of corporate assets. Theory suggests that asset tangibility increases borrowing capacity because it allows creditors to more easily repossess a firm's assets. Tangible assets, however, are often illiquid. We show that the redeployability of tangible assets is a main determinant of corporate leverage --- beyond standard proxies for tangibility. To establish this link, we distinguish across different asset categories in firms' balance sheets (e.g., machinery, land and buildings) and use an instrumental approach that incorporates measures of supply and demand for those individual assets. We also use a natural experiment driving differential increases in the supply of real estat...

This paper uses a unique dataset to study how firms managed liquidity during the financial crisis. Our analysis provides new insights on the interactions between internal liquidity, external funds, and real corporate decisions, such as investment and employment. We first describe how companies used credit lines during the crisis (access, size of facilities, and drawdown activity), the conditions under which these facilities were granted (fees, markups, maturity, and collateral), and whether managers had difficulties in renewing or initiating lines. We also describe the dynamics of credit line violations and the outcome of subsequent renegotiations. We show how companies substitute between credit lines and internal liquidity (cash and profits) when facing a severe credit shortage. Looking a...